PB Bell Acquires Multifamily Portfolio from Chinese Investor for $168.5m

By: Paul Dionne | Vizzda 

VizzdaNews described July as “one of the busiest months for multifamily sales since the early 2013 acquisition of Archstone Enterprises by Equity Residential and Avalon Bay Communities,” following the $22.25m sale of Elliot Crossing—the fifth eight-figure multifamily deal in little more than a week. While we stand by that assertion, it appears as though we spoke too soon. David Liu—an American citizen of Chinese descent based in Beijing and Los Angeles—through his company, Standard Portfolios, has completed the sale of seven apartment complexes totaling 2,749 units for $168.5m or $61,073 per unit. The buyer was a joint venture formed by Phoenix-based multifamily investor PB Bell and New York-based private equity firm Stonecutter Capital Management. PB Bell tendered $30m in cash and secured the seven properties under a $149.5m purchase money deed of trust with Prime Financial Partners.

The properties included in the portfolio sale—as well as the itemized sales price from 2007, the last time these properties changed hands outside the purview of bankruptcy court—are detailed below:

Complex	City	Price	Units	Price/Unit	2007 Price	Depreciation
Tela Verde	Glendale	$10,428,354	196	$92,347	$18,100,000	-42.38%
San Tan Crosswinds	Chandler	$16,400,000	374	$56,150	$21,000,000	-21.90%
Sienna Springs	Phoenix	$16,600,000	395	$47,468	$18,750,000	-11.47%
Alante at the Islands	Chandler	$33,236,700	320	$127,656	$40,850,000	-18.64%
Laguna Village	Chandler	$38,200,000	460	$97,826	$45,000,000	-15.11%
Whispering Meadows	Mesa	$24,175,146	432	$77,778	$33,600,000	-28.05%
Tuscany Palms	Mesa	$29,459,800	582	$65,464	$38,100,000	-22.68%

These seven properties were previously acquired as “Bethany Kingdom I” by now-defunct Bethany Holdings Group in June of 2007 for $215.4m or $78,072 per blended unit from Bascom Ventures. Concurrently with that prior sale, Bethany also acquired “Bethany Kingdom II” a 2,419 unit portfolio of five apartment complexes for $212.1m for a total outlay of $427.5m for 5,178 units or $82,561 per blended unit. The Bethany Kingdom I portfolio acquisition was financed with $164.5m in new debt with Lehman Brothers. This note was later securitized by Lasalle Bank as a Commercial Mortgage Backed Security (CMBS) bearing 5.72% per annum interest and maturing July 11^th, 2012. At the time of securitization, the portfolio was generating $11,114,693 in net operating income on 85.3% occupancy for an appraised value of $231.7m. 

That lofty valuation was never realized, however, and as credit conditions deteriorated throughout 2008 and early 2009, Bethany Holdings Group was forced to file for Chapter 11 Bankruptcy protection. San Diego-based distressed property specialist, Trigild Inc., was appointed receiver for the seven property portfolio following the bankruptcy filing and a bankruptcy order for sale was approved by the court in September of 2010. On October 1^st, 2010, Mr. Liu acquired assets of the Bethany Kingdom I portfolio for $133.1m or $48,242 per blended unit. Mr. Liu paid $10.1m in cash for the seven properties and assumed the existing $164.5m CMBS debt, amended and restated at the time of sale to reflect a principal balance of $123m. While the 2010 acquisition price is not itemized—and therefore doesn’t allow an asset-by-asset comparison as was possible for the 2007 acquisition price—based on the aggregate 2007 sale price of $133.1m and the current sale price of $168.5m, Mr. Liu earned a 26.6% absolute rate of return on his investment, net of holding costs and operational proceeds.

To Contact the Author:

Paul Dionne – pdionne@vizzda.com